Private construction activity slows as demand weakens, RICS survey finds

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nathan phillips
Nathan Philips Square, Toronto

Private commercial and industrial construction activity in Canada fell in the second quarter while housing activity moderated, according to the Q2 2016 Royal Institution of Chartered Surveyors (RICS) Canadian Construction Market Survey. On the plus side, the infrastructure sector showed continuing strength, and a majority of the qualified professionals responding to the survey are optimistic about its outlook in the year ahead.

Twenty-eight percent more respondents reported a drop in private industrial workloads in Q2 rather than a rise, while a net balance of 16 per cent said private commercial workloads fell; and a net balance of 55 per cent reported a drop in energy, oil and gas construction workloads. In contrast, a net balance of 39 per cent said their infrastructure workloads increased in Q2, and three-fifths of respondents expect that sector to drive construction growth over the next year.

Breaking down the results by region, respondents expect prices in the Prairies and the Atlantic provinces to experience downward pressure. In contrast, prices in Ontario and British Columbia are predicted to continue rising. Two-thirds of respondents expect Ontario to see the strongest growth in construction over the next few years, followed by British Columbia with 22 per cent.

“The market in the Greater Toronto Area (GTA) is strong with the condo market still booming along, especially downtown,” says Jeff Logan, a senior estimator with Canadian Turner Construction Company in Toronto.

New higher ed infrastructure program popular in Ontario

In Ontario outside the GTA, the market isn’t as strong in general, Logan says – with the exception of higher education construction. He attributes this to the new federal Post-Secondary Institutions Strategic Investment Fund (SIF), which will provide $2 billion over three years to support higher education infrastructure projects across Canada. “Turner has seen strong interest from colleges and universities in these funds, based on the schools’ issuing RFQ’s and RFP’s for projects on their campuses and engaging general contractors for which projects they would qualify if the institutions receive funding,” he adds. Under the program, monies may be used to accelerate eligible construction, repair and maintenance activities.

As for factors limiting construction expansion, financial constraints and regulatory and planning delays remain the two most significant ones, with 58 per cent and 48 per cent of respondents reporting issues with each respectively. However, the proportion of contributors citing insufficient demand as an impediment to growth increased to 40 per cent in Q2, the highest since RICS began collecting data in 2013.

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